Policy compliance and deterrence mechanism in the sharing economy: Accommodation sharing in Korea

Purpose: In a sharing economy, economically inactive members can serve as providers owing to the low start-up costs. However, such providers may operate without sufficient knowledge of the market and policies, causing significant problems. To prevent illegal sharing, governments encourage providers to register their businesses after meeting certain requirements, but most providers still operate unregistered businesses. The purpose of this paper is to explore the causes of policy non-compliance and suggest measures that can induce compliance. Design/methodology/approach: Based on the rational choice and deterrence theories, this study combines qualitative and quantitative research. The former is used to investigate the antecedent factors affecting compliance. Using the latter, this study assumes that the existence of platform operators can resolve information asymmetries. The qualitative findings provide the variables that can lead to policy compliance, while the quantitative research verifies the causal relationships. Findings: Business registration by providers in the sharing economy arises from their subjective cost-benefit calculations of policy compliance. According to the qualitative research, they believe there is a low risk of detection of policy non-compliance by the government. The quantitative research suggests that interventions by platform operators could resolve information asymmetries between the government and providers. Originality/value: This study designed a mechanism to guide providers toward policy compliance. To reduce friction with the existing market and ensure efficient growth, it is necessary to cooperate with sharing economy participants. The results suggest that the role of platform operators and the government is important.